Namdhari appoints Sprout Capital to look for buyers for retail arm

Simpli Namdharis store in Bengaluru. Picture: Company page on Google.

Namdhari, the company that deals in seeds, fruits, vegetables and other grocery items, has appointed Sprout Capital Advisors, an investment banker, to look for potential suitors for its retail unit, Simpli Namdhari's (formerly Namdhari Fresh), as the firm looks to cut back on its non-core businesses, sources told Moneycontrol.

While the development comes at a time when the modern trade setup has seen renewed pressure from sunrise sectors such as quick commerce, the company’s decision to sell its non-core assets is not new. In 2019, Simpli Namdhari's engaged with Flipkart parent Walmart, the US-based retail giant, for a potential buyout. The talks, however, did not fructify.

This time, Sprout is looking for suitors across the spectrum. From tapping family offices and conglomerates to pitching to larger companies and investors for a buyout, deal negotiations are underway, one of the sources said.

“Over the past months, the company has met with two to three parties and talks are progressing as planned. The retail unit, Simpli Namdhari's, is being valued at around Rs 220-250 crore during the negotiations,” the source said.

Simpli Namdhari's and Sprout Capital Advisors did not reply to Moneycontrol’s queries.

The company is only looking to exit its retail business, Namdhari Agro Fresh Private Ltd (NAFPL) that runs Simpli Namdhari's. Its other businesses such as Namdhari Seeds Pvt Ltd (NSPL) will continue to operate and run as usual, sources said.

NSPL, the seeds business, is the company’s core vertical which continues to scale and expand under chief executive officer Gurmukh Roopra.

The company, which operates under 20 retail stores and largely concentrates on Bengaluru, is reducing focus on grocery and offline retail at a time when the consumer behaviour is changing, thanks to the rapid rise of quick commerce. “The company faces competition from large national players such as Reliance Fresh, Nilgiris and (others)... which operate multiple stores across India and have a larger product mix,” CRISIL Ratings wrote in a report last year.

According to Tofler, a market intelligence data platform, the company recorded Rs 148 crore in revenue in FY23. While it is yet to file its FY24 results with the Registrar of Companies (RoC), CRISIL said in its note that Simpli Namdharis likely saw its top line dip to Rs 145 crore in FY24.

“There has been a deferral in ramp up of revenue than earlier expectations, due to delays in outlet addition in fiscal 2024. The company could not open any new stores during (FY24) due to lack of funding…(Simpli Namdhari's) closed three stores during FY23 and FY24 to curb losses,” CRISIL added in the report.

Belt-tightening measures, such as shuttering of unviable stores and other cost-optimisation measures, helped Simpli Namdhari's improve its bottom line. The company likely reduced its losses to Rs 27 crore in FY24, down from Rs 37 crore in FY23, the ratings agency said.

Improving financials could augur well for the company as it will likely help in commanding a better valuation during deal negotiations.